<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
CompDent Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
[COMPDENT LOGO]
100 MANSELL COURT EAST, SUITE 400
ROSWELL, GEORGIA 30076
March 18, 1997
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
CompDent Corporation (the "Annual Meeting") to be held on Wednesday, April 30,
1997, at 2:00 p.m., local time, at the Atlanta Airport Hilton Hotel, Atlanta,
Georgia.
The Annual Meeting has been called for the purpose of (i) electing two
Class II Directors, each for a three-year term, (ii) considering and voting upon
a proposal to approve the CompDent Corporation 1996 Stock Option Plan and (iii)
considering and voting upon such other business as may properly come before the
Annual Meeting or any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on March 14, 1997 as
the record date for the determination of stockholders entitled to notice of, and
to vote at, the Annual Meeting and any adjournments or postponements thereof.
The Board of Directors of the Company recommends that you vote "FOR" the
election of the nominees of the Board of Directors as Directors of the Company
and "FOR" the proposal to approve the CompDent Corporation 1996 Stock Option
Plan.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE ANNUAL MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE REQUESTED TO
COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED
ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF YOU
ATTEND THE ANNUAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF YOU HAVE
PREVIOUSLY RETURNED YOUR PROXY CARD.
Sincerely,
/s/ DAVID KLOCK
----------------------------------
David R. Klock
Chairman and Chief Executive
Officer
<PAGE> 3
COMPDENT CORPORATION
100 MANSELL COURT EAST, SUITE 400
ROSWELL, GEORGIA 30076
(770) 998-8936
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON WEDNESDAY, APRIL 30, 1997
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of CompDent
Corporation (the "Company") will be held on Wednesday, April 30, 1997, at 2:00
p.m., local time, at the Atlanta Airport Hilton Hotel, Atlanta, Georgia (the
"Annual Meeting"), for the purpose of considering and voting upon:
1. The election of two Class II Directors, each for a three-year
term;
2. A proposal to approve the CompDent Corporation 1996 Stock
Option Plan; and
3. Such other business as may properly come before the Annual
Meeting and any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on March 14, 1997 as
the record date for the determination of stockholders entitled to notice of, and
to vote at, the Annual Meeting and any adjournments or postponements thereof.
Only holders of Common Stock of record at the close of business on the record
date will be entitled to notice of, and to vote at, the Annual Meeting and any
adjournments or postponements thereof.
In the event there are not sufficient shares to be voted in favor of any of
the foregoing proposals at the time of the Annual Meeting, the Annual Meeting
may be adjourned in order to permit further solicitation of proxies.
By Order of the Board of Directors
/s/ BRUCE MITCHELL
-----------------------------------
Bruce A. Mitchell
Executive Vice President, General
Counsel and Secretary
Atlanta, Georgia
March 18, 1997
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE ANNUAL MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, YOU ARE
REQUESTED TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE
ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF
YOU ATTEND THE ANNUAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF YOU
HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.
<PAGE> 4
COMPDENT CORPORATION
100 MANSELL COURT EAST, SUITE 400
ROSWELL, GEORGIA 30076
(770) 998-8936
---------------
PROXY STATEMENT
---------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON WEDNESDAY, APRIL 30, 1997
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of CompDent Corporation (the "Company") for
use at the Annual Meeting of Stockholders of the Company to be held on
Wednesday, April 30, 1997, at 2:00 p.m., local time, at the Atlanta Airport
Hilton Hotel, Atlanta, Georgia, and any adjournments or postponements thereof
(the "Annual Meeting").
At the Annual Meeting, the stockholders of the Company will be asked to
consider and vote upon the following matters:
1. The election of two Class II Directors, each for a three-year
term with each such term to continue until the annual meeting
of stockholders of the Company to be held in the year 2000 (the
"2000 Annual Meeting") and until the respective Director's
successor is duly elected and qualified;
2. A proposal to approve the CompDent Corporation 1996 Stock
Option Plan (the "1996 Plan"); and
3. Such other business as may properly come before the Annual
Meeting and any adjournments or postponements thereof.
The Notice of Annual Meeting of Stockholders, Proxy Statement and Proxy
Card are first being mailed to stockholders of the Company on or about March 18,
1997 in connection with the solicitation of proxies for the Annual Meeting. The
Board of Directors has fixed the close of business on March 14, 1997 as the
record date for the determination of stockholders entitled to notice of, and to
vote at, the Annual Meeting (the "Record Date"). Only holders of record of the
common stock, par value $.01 per share, of the Company ("Common Stock") at the
close of business on the Record Date will be entitled to notice of, and to vote
at, the Annual Meeting. As of the Record Date, there were approximately
10,064,393 shares of Common Stock outstanding and entitled to be voted at the
Annual Meeting and approximately thirty-four (34) stockholders of record. Each
holder of shares of Common Stock outstanding as of the close of business on the
Record Date will be entitled to one vote for each share held of record with
respect to each matter submitted at the Annual Meeting.
The presence, in person or by proxy, of a majority of the total number of
outstanding shares of Common Stock is necessary to constitute a quorum for the
transaction of business at the Annual Meeting. A quorum being present, the
affirmative vote of a plurality of the votes cast is necessary to elect each of
the nominees as a Director of the Company. With respect to Proposal
2 -- Approval of the 1996 Plan, the affirmative vote of a majority of the shares
of Common Stock present, or represented, and entitled to vote is required to
approve such proposal. Shares that reflect abstentions or "broker non-votes"
(i.e., shares represented at the meeting held by brokers or nominees as to which
instructions have not been received from the beneficial owners or persons
entitled to vote such shares and with respect to which the broker or nominee
does not have discretionary voting power to vote such shares) will be counted
for purposes of determining whether a quorum is present for the transaction of
business at the meeting. Generally, abstentions will be treated as votes cast
against a particular proposal and broker non-votes will have no impact on the
outcome of the vote on a
<PAGE> 5
particular proposal submitted to the Annual Meeting. With respect to the
election of Directors, votes may be cast in favor of or withheld from the
nominees; votes that are withheld will be excluded entirely from the vote and
will have no effect. Broker non-votes will also have no effect on the outcome of
the election of Directors. With respect to Proposal 2, abstentions and broker
non-votes will have the effect of a vote against the proposal.
STOCKHOLDERS OF THE COMPANY ARE REQUESTED TO COMPLETE, DATE, SIGN AND
RETURN THE ACCOMPANYING PROXY CARD IN THE ENCLOSED ENVELOPE. SHARES OF COMMON
STOCK REPRESENTED BY PROPERLY EXECUTED PROXIES RECEIVED BY THE COMPANY AND NOT
REVOKED WILL BE VOTED AT THE ANNUAL MEETING IN ACCORDANCE WITH THE INSTRUCTIONS
CONTAINED THEREIN. IF INSTRUCTIONS ARE NOT GIVEN THEREIN, PROPERLY EXECUTED
PROXIES WILL BE VOTED "FOR" THE ELECTION OF THE NOMINEES FOR DIRECTORS LISTED IN
THIS PROXY STATEMENT AND "FOR" THE APPROVAL OF THE 1996 PLAN. IT IS NOT
ANTICIPATED THAT ANY MATTERS OTHER THAN THE ELECTION OF THE DIRECTORS AND THE
APPROVAL OF THE 1996 PLAN WILL BE PRESENTED AT THE ANNUAL MEETING. IF OTHER
MATTERS ARE PRESENTED, PROXIES WILL BE VOTED IN ACCORDANCE WITH THE DISCRETION
OF THE PROXY HOLDERS.
A properly completed proxy may be revoked at any time before it is voted on
any matter (without, however, affecting any vote taken prior to such revocation)
by the stockholder of record represented by such proxy by giving written notice
of such revocation to the Secretary of the Company, or by signing and duly
delivering a proxy bearing a later date, or by attending the Annual Meeting and
voting in person. Attendance at the Annual Meeting will not, by itself, revoke a
proxy.
The Annual Report of the Company, including financial statements for the
fiscal year ended December 31, 1996 ("Fiscal 1996"), is being mailed to
stockholders of the Company concurrently with this Proxy Statement. The Annual
Report, however, is not a part of the proxy solicitation material.
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors of the Company (the "Board") consists of five
members and is divided into three classes, with one Director in Class I and two
Directors in each of Class II and Class III. Directors serve for three-year
terms with one class of Directors being elected by the Company's stockholders at
each annual meeting.
At the Annual Meeting, two Class II Directors will be elected to serve
until the 2000 Annual Meeting and until the respective Director's successor is
duly elected and qualified. The Board has nominated Philip Hertik and David F.
Scott for re-election as the Class II Directors. The nominees have each agreed
to stand for re-election and to serve, if elected, as a Director. However, if a
nominee fails to stand for election or is unable to accept election, proxies
will be voted for the election of such other person as the Board may recommend.
THE BOARD RECOMMENDS A VOTE FOR THE ELECTION OF THE NOMINEES OF THE BOARD
AS DIRECTORS OF THE COMPANY.
INFORMATION REGARDING DIRECTORS
The Board held four (4) meetings during Fiscal 1996. During Fiscal 1996,
each of the incumbent Directors attended at least 75% of the aggregate number of
meetings of the Board and of the committees of which he was a member. The
Company's Board established an Audit Committee, a Compensation Committee and a
Stock Option Program Committee (the "Option Committee") during Fiscal 1996. As
of December 1996, the functions of the Compensation Committee and the Option
Committee were consolidated into the Compensation Committee. The Audit Committee
recommends a firm to be appointed as independent accountants to audit the
Company's financial statements and to perform services related to such audits,
reviews the scope and results of audits with the independent accountants,
reviews with management and the independent accountants the Company's year-end
operating results, considers the adequacy of the internal accounting procedures
and considers the effect of such procedures on the accountants' independence.
During Fiscal 1996, the Audit Committee, which consisted of Messrs. Ciffolillo,
Hertik and Scott, held four (4)
2
<PAGE> 6
meetings. The Compensation Committee reviews and recommends the compensation
arrangements for all Directors and officers, approves such arrangements for
other senior level employees and administers and takes such other action as may
be required in connection with certain compensation and incentive plans of the
Company and its subsidiaries. During Fiscal 1996, the Compensation Committee,
which consisted of Messrs. Ciffolillo, Hertik, Scott and Stephenson, held four
(4) meetings. With the consolidation of the functions of the Option Committee
and Compensation Committee, the Compensation Committee currently determines the
options or stock to be issued to eligible persons under the CompDent Corporation
1994 Stock Option and Grant Plan (the "1994 Plan") and options to be granted
under the 1996 Plan and prescribes the terms and provisions of such options or
stock. The Compensation Committee also administers the CompDent Corporation
Employee Stock Purchase Plan (the "ESPP") and the CompDent Corporation
Non-Employee Directors' Stock Option Plan (the "Directors' Plan," together with
the 1994 Plan, the 1996 Plan and the ESPP, are collectively referred to herein
as the "Plans"). In addition, the Compensation Committee construes and
interprets the Plans and issuances thereunder, and establishes, amends and
revokes rules and regulations relating to the administration of the Plans. The
former Option Committee held four (4) meetings during Fiscal 1996. Mr. Hertik
resigned from the Audit Committee and Compensation Committee effective January
1997 in connection with his appointment as President of Dental Health
Management, Inc., a wholly owned subsidiary of the Company. Upon Mr. Hertik's
resignation from the Audit Committee, Mr. Stephenson was appointed by the Board
to serve on the Audit Committee.
Directors who are officers or employees of the Company receive no
compensation for service as Directors. Directors who are not officers or
employees of the Company receive such compensation for their services as the
Board may from time to time determine. Each of Messrs. Ciffolillo, Hertik, Scott
and Stephenson received an annual fee of $20,000 for service on the Board and
its committees. All Directors are reimbursed for expenses incurred in connection
with attendance at meetings. Each new non-employee Director will receive 20,000
shares of Common Stock on the date such Director is initially elected or
appointed to the Board pursuant to the Directors' Plan. Each of these options
vests annually in equal installments over a four-year period and expires ten
years from the date of grant. Dr. Scott was granted an option pursuant to the
Directors' Plan to purchase 20,000 shares of Common Stock at an exercise price
of $36.25 per share.
Set forth below is certain information regarding the Directors of the
Company, including the Class II Directors who have been nominated for
re-election at the Annual Meeting, based on information furnished by them to the
Company.
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE SINCE
- ---- --- --------
<S> <C> <C>
CLASS I-TERM EXPIRES 1999
Joseph E. Stephenson........................................ 64 1993
CLASS II-TERM EXPIRES 1997
Philip Hertik*.............................................. 46 1993
David F. Scott, Jr.*+....................................... 55 1996
CLASS III-TERM EXPIRES 1998
David R. Klock.............................................. 52 1993
Joseph A. Ciffolillo........................................ 58 1995
</TABLE>
- ---------------
* Nominee for re-election.
+ Dr. Scott was elected to serve as a Class II Director of the Company on
February 1, 1996 to fill the vacancy created by the resignation of Roger B.
Kafker as a Director of the Company.
3
<PAGE> 7
The principal occupation and business experience for at least the last five
years of each Director of the Company is set forth below.
JOSEPH A. CIFFOLILLO has served as a Director of the Company since 1995.
Mr. Ciffolillo retired from his position as Executive Vice President -- Office
of the Chairman of Boston Scientific Corp. ("Boston Scientific"), a
Massachusetts-based manufacturer of medical devices, in April 1996 after having
served in that capacity since 1995. From 1987 to 1995, Mr. Ciffolillo was Chief
Operating Officer of Boston Scientific. Mr. Ciffolillo currently serves on the
Board of Directors of each of Innovative Devices and Cardiothorasic Systems.
PHILIP HERTIK has served as a Director of the Company since July 1993 and
was appointed as President of Dental Health Management, Inc., a wholly owned
subsidiary of the Company, effective January 1997. Mr. Hertik was a Principal at
the firm of P. Hertik & Associates from January 1996 to January 1997. Mr. Hertik
served as the Chief Executive Officer of Coventry Corporation ("Coventry"), a
managed health care company, from June 1992 to December 1995, and its Director
from November 1990 to December 1995. From November 1990 to June 1992, he was
President and Chief Operating Officer of Coventry.
DAVID R. KLOCK, PH.D., C.L.U. was appointed President of the Company in
1991 and Chairman, President and Chief Executive Officer in 1993 and currently
serves as Chairman and Chief Executive Officer. Dr. Klock was a Professor of
Finance and Insurance at the University of Central Florida from 1981 through
1991, when he joined the Company on a full-time basis.
DAVID F. SCOTT, JR., PH.D. became a Director of the Company on February 1,
1996. Dr. Scott is a Holder, Phillips-Schenck Chair in American Private
Enterprise, is Executive Director of the Dr. Phillips Institute for the Study of
American Business Activity and has been Professor of Finance at the College of
Business Administration, University of Central Florida since 1982. Prior to
1982, Dr. Scott served as Head of the Department of Finance, Insurance and
Business Law at Virginia Polytechnic Institute and State University. Dr. Scott
also serves on the economic forecasting panel (Livingston Survey) of the Federal
Reserve Bank of Philadelphia and is a member of the Board of Economists of
Florida Time magazine.
JOSEPH E. STEPHENSON has served as Director of the Company since June 1993.
Mr. Stephenson is currently serving as Chairman and Chief Executive Officer of
Washington Life and has been serving in that capacity since 1995. Mr. Stephenson
served as Chairman of the Board of Directors, President and Chief Executive
Officer of Shenandoah Life Insurance Company from August 1989 through June 1993,
when he retired.
4
<PAGE> 8
EXECUTIVE OFFICERS
Set forth below is certain information regarding each of the executive
officers of the Company as of the Record Date, including their principal
occupation and business experience for at least the last five years.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
David R. Klock................. 52 Chairman and Chief Executive Officer*
Phyllis A. Klock............... 51 President*
Sharon S. Graham............... 45 Executive Vice President, Treasurer and Chief Financial
Officer
Bruce A. Mitchell.............. 41 Executive Vice President, General Counsel and Secretary
Philip Hertik.................. 46 President of Dental Health Management, Inc., a wholly
owned subsidiary of the Company+
</TABLE>
- ---------------
* David R. Klock and Phyllis A. Klock are husband and wife.
+ Philip Hertik was appointed to this position effective January 1997.
The principal occupation and business experience for at least the last five
years of each executive officer of the Company, other than executive officers
also serving as Directors, is set forth below.
PHYLLIS A. KLOCK became associated with the Company in 1981 as a
consultant. She joined the Company on a full-time basis in 1986 as Vice
President of Administration and was appointed Corporate Secretary in 1987,
Senior Vice President, Corporate Secretary and Chief Administrative Officer in
1993, Executive Vice President in 1995 and President in January 1997. Prior to
becoming associated with the Company, Ms. Klock served as an academic
administrator and held various management positions with two insurance
companies.
SHARON S. GRAHAM, D.B.A. became associated with the Company in 1984 as a
consultant in the area of financial planning. She joined the Company on a
full-time basis as Vice President, Treasurer and Chief Financial Officer in 1994
and became an Executive Vice President in 1995. Prior to joining the Company,
Dr. Graham was an Associate Professor of Finance and Assistant Dean in the
College of Business at the University of Central Florida for ten years.
BRUCE A. MITCHELL, ESQ. was appointed Executive Vice President and General
Counsel of the Company in February 1996 and assumed the additional role of
Secretary in January 1997. Mr. Mitchell was formerly a Partner in the Melbourne,
Florida law firm of Reinman, Harrell, Mitchell & Wattwood, P.A., from 1985
through February 1996, where Mr. Mitchell served as corporate counsel to the
Company beginning in 1982.
Each of the executive officers holds his or her respective office until the
regular annual meeting of the Board following the annual meeting of stockholders
and until his or her successor is elected and qualified or until his or her
earlier resignation or removal.
5
<PAGE> 9
EXECUTIVE COMPENSATION
The following sections of this Proxy Statement set forth and discuss the
compensation paid or awarded during the last three years to the Company's Chief
Executive Officer and the three other most highly compensated executive officers
who earned in excess of $100,000 during Fiscal 1996 (the "named executive
officers").
SUMMARY COMPENSATION
Summary Compensation. The following summary compensation table sets forth
information concerning compensation for services rendered in all capacities
awarded to, earned by or paid to the Company's Chief Executive Officer and the
named executive officers during each of the fiscal years ended December 31,
1996, December 31, 1995 and December 31, 1994.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
ANNUAL ------------
COMPENSATION SECURITIES
----------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#) COMPENSATION ($) (1)
- --------------------------- ---- ---------- --------- ------------ --------------------
<S> <C> <C> <C> <C> <C>
David R. Klock................ 1996 200,000 88,000 200,000 13,404
Chief Executive Officer 1995 180,000 90,000 -- 13,538
1994 169,600 84,800 -- 15,954
Phyllis A. Klock.............. 1996 180,000 79,200 100,000 13,258
Executive Vice President 1995 165,000 82,500 -- 13,508
1994 136,100 72,500 -- 15,046
Sharon S. Graham.............. 1996 180,000 79,200 80,000 11,413
Executive Vice President 1995 134,375 80,000 20,000 11,767
1994 92,278 50,000 9,000 4,279
Bruce A. Mitchell............. 1996 165,000 99,200 100,000 18,580
Executive Vice President
</TABLE>
- ---------------
(1) The figures for 1996 include premiums on life insurance policies paid by the
Company of $1,566 on behalf of Dr. Klock and $1,620 on behalf of each of
Ms. Klock, Dr. Graham and Mr. Mitchell; insurance premiums for group
long-term disability insurance policies paid by the Company of $638, $638,
$593 and $410 on behalf of Dr. Klock, Ms. Klock, Dr. Graham and Mr.
Mitchell, respectively; and $2,000, $1,800 and $450 contributed by the
Company under its 401(k) plan on behalf of Dr. Klock, Ms. Klock and Mr.
Mitchell, respectively. Such figures also include annual car allowances of
$9,200 paid to each of Dr. Klock, Ms. Klock and Dr. Graham, and $8,400 to
Mr. Mitchell. Mr. Mitchell was provided a living allowance of $7,700 in
Fiscal 1996 in connection with his relocation to the Company's principal
place of business.
6
<PAGE> 10
Option Grants. The following table sets forth certain information
concerning the individual grant of options to purchase shares of Common Stock of
the Company to certain named executive officers of the Company who received such
grants during Fiscal 1996.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------
NUMBER OF PERCENT POTENTIAL REALIZABLE
SECURITIES OF TOTAL VALUE AT ASSUMED ANNUAL
UNDERLYING OPTIONS EXERCISE RATES OF STOCK PRICE
OPTIONS GRANTED OR BASE APPRECIATION FOR OPTION TERM(1)
GRANTED TO EMPLOYEES PRICE EXPIRATION --------------------------------
NAME (#) IN FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
- ---- ---------- -------------- -------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
David R. Klock......... 50,000(2) 7.73% 36.25 2/02/06 1,139,872 2,888,658
150,000(3) 23.18% 29.75 10/29/06 2,806,442 7,112,076
Phyllis A. Klock....... 20,000(2) 3.09% 36.25 2/02/06 455,949 1,155,463
80,000(4) 12.36% 29.75 10/29/06 1,496,769 3,793,107
Sharon S. Graham....... 80,000(4) 12.36% 29.75 10/29/06 1,496,769 3,793,107
Bruce A. Mitchell...... 20,000(2) 3.09% 36.25 2/02/06 455,949 1,155,463
80,000(4) 12.36% 29.75 10/29/06 1,496,769 3,793,107
</TABLE>
- ---------------
(1) This column shows the hypothetical gain or option spreads of the options
granted based on assumed annual compound stock appreciation rates of 5% and
10% over the full 10-year term of the options. The 5% and 10% assumed rates
of appreciation are mandated by the rules of the Securities and Exchange
Commission and do not represent the Company's estimate or projection of
future Common Stock prices.
(2) These stock options vest in equal annual increments over the four-year
period ending February 2, 2000.
(3) With respect to this stock option, 70,000 shares vested immediately upon the
date of grant and 80,000 shares vest in equal annual increments over the
four-year period ending October 29, 2000.
(4) With respect to these stock options, 50,000 shares vested immediately upon
the date of grant and 30,000 shares vest in equal annual increments over
the four-year period ending October 29, 2000.
Option Exercises and Option Values. The following table sets forth
information concerning the number and value of unexercised options to purchase
Common Stock of the Company held by certain named executive officers of the
Company who held such options at December 31, 1996. None of the named executive
officers of the Company exercised any stock options during Fiscal 1996.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT DECEMBER 31, 1996(#) AT DECEMBER 31, 1996($)(1)
-------------------------------- --------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
David R. Klock (2)............. 70,000 130,000 385,000 440,000
Phyllis A. Klock (3)........... 50,000 50,000 275,000 165,000
Sharon S. Graham (4)........... 59,499 49,501 451,549 404,061
Bruce A. Mitchell (5).......... 50,000 50,000 275,000 165,000
</TABLE>
- ---------------
(1) Based on the last reported sale price on the Nasdaq National Market on
December 31, 1996 of $35.25 less the option exercise price.
7
<PAGE> 11
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION
During Fiscal 1996, the Compensation Committee of the Board consisted of
Joseph A. Ciffolillo, Philip Hertik, David F. Scott, Jr. and Joseph Stephenson,
each of whom was an outside Director. Mr. Hertik resigned from the Compensation
Committee in January 1997 upon his appointment as President of Dental Health
Management, Inc., a wholly owned subsidiary of the Company.
Compensation Policies for Executive Officers. The Compensation Committee's
executive compensation philosophy is: (i) to provide competitive levels of
compensation that integrate pay with the individual executive's performance and
the Company's annual and long-term performance goals; (ii) to motivate key
executives to achieve strategic business goals and reward them for their
achievement; (iii) to provide compensation opportunities and benefits that are
comparable to those offered by other companies in the managed health and dental
care industry, thereby allowing the Company to compete for and retain talented
executives who are critical to the Company's long-term success; and (iv) to
align the interests of key executives with the long-term interests of
stockholders and enhance shareholder value through the granting of stock
options.
The compensation of the Company's Chief Executive Officer and other
executive officers is currently comprised of annual base salary, annual
performance incentives in the form of cash bonuses and long-term performance
incentives in the form of stock option grants under the 1994 Plan and the 1996
Plan.
The Compensation Committee has determined that base salaries of executive
officers should be set at levels that are competitive with those of executives
of comparably sized companies in the managed health and dental care industry. In
addition, the Compensation Committee believes that it is appropriate to reward
outstanding performance through a combination of cash bonuses and stock option
grants and to provide a competitive compensation package, through stock option
grants, that will enable the Company to attract and retain the executives needed
to achieve such performance. The Compensation Committee also has determined that
any stock option or other equity-based compensation should involve long-term
vesting to encourage tenure and enhancement of shareholder value over the
long-term.
Base Salary. Base salaries for executive officers are targeted according
to the salaries of employees holding similar offices and having similar
responsibilities within the managed health and dental care industry. Annual
salary adjustments for executive officers are determined by evaluating the
competitive marketplace, the performance of the Company, the performance of the
executive officer and any change in the responsibilities assumed by the
executive officer. Salary adjustments are normally determined and made on an
annual basis.
The base salaries for David R. Klock, the Chairman and Chief Executive
Officer, Phyllis A. Klock, President, and Sharon S. Graham, Executive Vice
President and Chief Financial Officer, were established pursuant to employment
agreements which commenced on May 24, 1995, and the base salary for Bruce A.
Mitchell, Executive Vice President, General Counsel and Secretary, was
established pursuant to an employment agreement which commenced on February 1,
1996. Such employment agreements are described below under "Employment
Agreements With Executive Officers" and "-- Compensation of the Chief Executive
Officer." These base salaries were determined with reference to the base
salaries of executives of similarly sized companies in the managed health and
dental care industry.
Cash Bonus Plan. The Company adopted an Executive Bonus Plan for Fiscal
1996 on terms similar to those in effect for previous years. The plan is
administered by the Compensation Committee of the Board, which determines
eligible participants, performance goals, measurement criteria, performance
ratings and amount and timing of payments. Each executive is eligible to receive
a predetermined percentage of such executive's base salary for the year on the
basis of the Company's performance over the year in relation to certain
predetermined financial and operating goals. All awards are paid in full, in
cash, following the year of performance. Awards are granted under the plan at
the sole discretion of the Compensation Committee.
The Compensation Committee awarded bonuses to its executive officers for
Fiscal 1996 in an amount equal to forty percent (40%) of such officer's base
salary for the year, based upon the achievement of the performance goals
determined by the Compensation Committee related to the Company's earnings for
Fiscal
8
<PAGE> 12
1996. The Compensation Committee also considered the following achievements of
the Company: (i) the acquisition of Texas Dental Plans, Inc., a Texas-based
provider of managed dental care plans, and its affiliates in January 1996 and
(ii) the acquisition of Dental Care Plus Management, Corp., a Chicago-based
provider of managed dental care plans, and its affiliates in May 1996.
Stock Option Grants. Stock options are designed to attract and retain
executives who can make significant contributions to the Company's success;
reward executives for such significant contributions; give executives a
long-term incentive to increase shareholder value; and align the interests of
the Company's senior executives with those of its stockholders. In determining
whether to grant stock options to executive officers, the Compensation Committee
evaluates each officer's performance by examining criteria similar to that
involved in fixing cash bonuses (but without any specific performance measures)
and evaluating individual performance reviews. The Compensation Committee also
may grant stock options for executive retention purposes, taking into account,
among other things, general industry practices. Stock options generally have
been granted with a ten-year term and an exercise price equal to 100% of the
fair market value of the Common Stock on the grant date.
Compensation of Chief Executive Officer. David R. Klock, the Company's
Chairman and Chief Executive Officer, receives competitive compensation and
regular benefits in effect for senior executives of the Company. In Fiscal 1996,
the Compensation Committee established a base salary for Dr. Klock of $200,000
and Dr. Klock received a bonus of $88,000 on the same basis as other senior
executives of the Company through his participation in the Company's Executive
Bonus Plan. In addition to such cash compensation, Dr. Klock also received
options to acquire an aggregate of 200,000 shares of Common Stock at an exercise
price equal to the fair market value of the Common Stock on the date of grant.
See "-- Compensation Policies for Executive Officers."
Joseph A. Ciffolillo David F. Scott, Jr. Joseph E. Stephenson
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Since July 1993, all decisions with respect to executive officer
compensation have been made by the Compensation Committee. The Compensation
Committee reviews and makes recommendations regarding the compensation for top
management and key employees of the Company, including salaries and bonuses. The
members of the Compensation Committee for Fiscal 1996 were Messrs. Ciffolillo,
Hertik, Scott and Stephenson. Mr. Hertik resigned from the Compensation
Committee upon his appointment as President of Dental Health Management, Inc., a
wholly owned subsidiary of the Company, effective January 1997. No member of the
Compensation Committee is an officer of the Company.
EMPLOYMENT AGREEMENTS WITH EXECUTIVE OFFICERS
The Company has entered into employment agreements with each of David R.
Klock, Phyllis A. Klock, Sharon S. Graham and Bruce A. Mitchell. The agreements
generally provide for continuation of base salary, pro rated bonus payments and
continuation of certain benefits for up to two years following termination of
employment without cause or in the event of a breach by the Company. Upon
termination of employment for any reason within up to one year following a
change of control of the Company (as defined), the Company shall pay severance
equal to the executive's aggregate salary and, in certain instances, bonus for
up to the two most recently completed years and continuation of certain
benefits. Each of the executives is subject to a one-year restriction on
competition with the Company following termination of employment for any reason.
9
<PAGE> 13
SHAREHOLDER RETURN PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total shareholder return on the Company's Common Stock, based on
the market price of the Company's Common Stock with the total return of
companies included within the Nasdaq Stock Market Index and a peer group of
companies included within the Nasdaq Health Services Industry Index for the
period commencing May 1995 and ending December 1996. The calculation of total
cumulative return assumes a $100 investment in the Company's Common Stock, the
Nasdaq Stock Market Index and the Nasdaq Health Services Industry Index on May
24, 1995, the date of the Company's initial public offering, and the
reinvestment of all dividends, if any.
<TABLE>
<CAPTION>
MEASUREMENT PERIOD COMPDENT NASDAQ U.S. NASDAQ HEALTH
(FISCAL YEAR COVERED) CORPORATION COMPANIES SERVICES
<S> <C> <C> <C>
MAY 1995 100 100 100
DEC. 1995 286 121 137
DEC. 1996 243 149 137
</TABLE>
PROPOSAL 2
APPROVAL OF THE COMPDENT CORPORATION
1996 STOCK OPTION PLAN
PROPOSAL
The Board adopted the 1996 Plan on December 18, 1996, following the grant
of options for substantially all shares reserved for issuance under the
Company's 1994 Plan. As in the case of the 1994 Plan, the 1996 Plan is intended
to promote the interests of the Company by providing an incentive to obtain and
retain the services of highly qualified persons to contribute to the management,
growth and profitability of the Company and its subsidiaries. The Directors
believe that the 1996 Plan is in the best interests of the Company and recommend
its approval by stockholders. As of December 31, 1996, non-qualified stock
options to purchase 370,000 shares of Common Stock have been granted under the
1996 Plan. See "Executive Compensation."
A total of 900,000 shares of Common Stock have been reserved for issuance
under the 1996 Plan. Based solely upon the closing price of the Company's Common
Stock as reported by Nasdaq on the Record Date, the maximum aggregate market
value of the securities to be issued under the 1996 Plan is $28,125,000. The
total number of shares available under the 1996 Plan will be subject to
adjustment upon the occurrence of a
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<PAGE> 14
stock dividend, stock split or other change affecting the Common Stock. The 1996
Plan also provides that stock options with respect to no more than 250,000
shares of Common Stock may be granted to any one individual in any one calendar
year. The shares of Common Stock issued by the Company under the 1996 Plan may
be authorized but unissued shares, or shares reacquired by the Company. To the
extent that awards under the 1996 Plan do not vest or otherwise revert to the
Company, the shares of Common Stock represented by such awards may be the
subject of subsequent awards.
The Company is seeking stockholder approval and ratification of the 1996
Plan in accordance with the requirements of the Nasdaq National Market
("Nasdaq") and in order to permit further grants of stock options under the 1996
Plan. While stockholder approval is not a condition to the non-qualified stock
options previously granted under the 1996 Plan, additional options will not be
granted under the 1996 Plan unless and until the 1996 Plan is approved by
stockholders (or will be granted subject to stockholder approval). The Company
intends to take such actions as shall be necessary or appropriate to obtain
stockholder approval of the 1996 Plan, including resubmission to stockholders of
the 1996 Plan in the event stockholder approval is not obtained at the Annual
Meeting, in order to maintain quotation of its Common Stock on Nasdaq. It is
possible, however, that the failure to obtain stockholder approval of the 1996
Plan could result ultimately in loss of such quotation.
SUMMARY OF THE 1996 PLAN
The following description of certain features of the 1996 Plan is intended
to be a summary only. The summary does not purport to be complete and is
qualified in its entirety by reference to the 1996 Plan, the full text of which
is attached hereto as Appendix A.
Plan Administration; Eligibility. The 1996 Plan is administered by the
Board or by a committee appointed by the Board. All members of such committee
must be "Non-Employee Directors" as that term is defined under the rules
promulgated by the Securities and Exchange Commission (the "Commission") under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
"outside directors" as defined in Section 162(m) of the Code and the regulations
promulgated thereunder. The Board or authorized committee will interpret and
make any determination under the 1996 Plan and any options granted thereunder.
The 1996 Plan is currently administered by the Compensation Committee.
Persons eligible to participate in the 1996 Plan are officers and other
employees, Directors, consultants, advisors and other key persons of the Company
and its subsidiaries who are responsible for or contribute to the management,
growth or profitability of the Company and its subsidiaries ("Eligible
Persons"), as selected from time to time by the Compensation Committee. The
Compensation Committee has full power to select from among the Eligible Persons
the individuals to whom awards will be granted, to make any combination of
awards to such individuals, and to determine the specific terms and conditions
of each award, subject to the provisions of the 1996 Plan.
The Compensation Committee, in its discretion, may delegate to the Chief
Executive Officer of the Company, all or part of the Compensation Committee's
authority and duties with respect to the granting of awards to individuals who
are not subject to Section 16 of the Exchange Act and are not "covered
employees" within the meaning of Section 162(m) of the Code.
Stock Options. The 1996 Plan permits the grant of options to purchase
Common Stock intended to qualify as incentive stock options ("Incentive
Options") under Section 422 of the Code and options that do not so qualify
("Non-Qualified Options"). The option exercise price of each option will be
determined by the Compensation Committee but may not be less than 100% of the
fair market value of the Common Stock on the date of grant.
The term of each option will be fixed by the Compensation Committee and may
not exceed ten years from the date of grant in the case of an Incentive Option.
The Compensation Committee will determine at what time or times each option may
be exercised and, subject to the provisions of the 1996 Plan, the period of
time, if any, after retirement, death, disability or termination of employment
during which options may be
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<PAGE> 15
exercised. Options may be made exercisable in installments and the
exercisability of options may be accelerated by the Compensation Committee.
Upon exercise, the option exercise price must be paid in full either in
cash or by certified or bank check or other instrument acceptable to the
Compensation Committee or, if the Compensation Committee so permits, by delivery
of shares of Common Stock already owned by the optionee. The exercise price may
also be delivered to the Company by a broker pursuant to irrevocable
instructions to the broker from the optionee or by delivery of a promissory note
if authorized by the Board.
At the discretion of the Compensation Committee, stock options granted
under the 1996 Plan may include a "reload" feature pursuant to which an optionee
exercising an option by delivery of shares of Common Stock would automatically
be granted an additional stock option (with an exercise price equal to the fair
market value of the Common Stock on the date the additional stock option is
granted) to purchase that number of shares of Common Stock equal to the number
delivered to exercise the original stock option. The purpose of this feature is
to enable participants to maintain any equity interest in the Company without
dilution.
To qualify as Incentive Options, options must meet additional Federal tax
requirements, including limits on the value of shares subject to Incentive
Options which first become exercisable in any one calendar year, and a shorter
term and higher minimum exercise price in the case of certain large
stockholders.
Amendments and Termination. The Board may at any time amend or discontinue
the 1996 Plan and the Compensation Committee may at any time amend or cancel
outstanding awards for the purpose of satisfying changes in the law or for any
other lawful purpose. However, no action may be taken which adversely affects
any rights under outstanding options without the option holder's consent.
Further, amendments to the 1996 Plan may be subject to approval by the Company's
stockholders if and to the extent required by the Code to preserve the qualified
status of Incentive Options.
Change of Control Provisions. The 1996 Plan provides that in the event of
a dissolution or liquidation of the Company, a merger, reorganization or
consolidation in which a majority of the outstanding voting power of the Company
is acquired by a third-party or a sale to a third-party of all or substantially
all of the Company's assets or Common Stock, options will not be accelerated,
except as the Compensation Committee may otherwise determine in connection with
a specific award or in its discretion thereafter.
TAX ASPECTS UNDER THE U.S. INTERNAL REVENUE CODE
The following is a summary of the principal Federal income tax consequences
of option grants under the 1996 Plan. It does not describe all Federal tax
consequences under the 1996 Plan, nor does it describe state or local tax
consequences.
Incentive Options. Under the Code, an employee generally will not realize
taxable income by reason of the grant or the exercise of an Incentive Option. If
an employee exercises an Incentive Option and does not dispose of the shares
until after the later of (a) two years from the date the option was granted and
(b) one year from the date shares were transferred to the employee, the entire
gain, if any, recognized upon a sale or exchange of such shares should be
taxable to the employee as long-term capital gain, and the Company will not be
entitled to any deduction. The exercise of an Incentive Option, however, may
result in alternative minimum tax liability for the employee. If an employee
disposes of shares within such one-year or two-year period in a manner so as to
violate the holding period requirements (a "disqualifying disposition"), the
employee will realize ordinary income in the year of disposition, and the
Company generally will receive a corresponding deduction, in an amount generally
equal to the excess of (1) the lesser of (x) the amount realized on the sale or
exchange of such shares (if the disposition is by sale or exchange) and (y) the
fair market value of the shares on the date the option was exercised over (2)
the exercise price for the shares. Any additional gain recognized on the
disposition should be treated as long-term or short-term capital gain and any
loss generally will be treated as long-term or short-term capital loss,
depending upon the holding period of the stock. A disqualifying disposition
generally includes any sale, exchange, gift or transfer of legal title (other
than by pledge) of shares during either of the holding periods described above.
Special rules apply in certain
12
<PAGE> 16
cases, including transfer to the employee's spouse, transfer to the employee's
former spouse incident to divorce, and transfer on death. Special rules also
apply if an employee surrenders shares of Common Stock in payment of the
exercise price of the Incentive Option.
An Incentive Option that is exercised by an employee more than three months
after an employee's employment terminates will be treated as a Non-Qualified
Option for Federal income tax purposes; provided that in the case of termination
by reason of disability, the three-month period is extended to one year, and in
the case of death during employment or within three months after termination,
the three-month limitation does not apply.
Non-Qualified Options. There are no Federal income tax consequences to
either the optionee or the Company on the grant of a Non-Qualified Option. On
the exercise of a Non-Qualified Option, the optionee generally has taxable
ordinary income equal to the excess of the fair market value of the Common Stock
received on the exercise date over the option price of the shares. The
optionee's tax basis for the shares acquired upon exercise of a Non-Qualified
Option is increased by the amount of such taxable income. The Company generally
will be entitled to a Federal income tax deduction in an amount equal to such
excess. Upon the sale of the shares acquired by exercise of a Non-Qualified
Option, the optionee generally will recognize long-term or short-term capital
gain or loss depending upon his or her holding period for such shares. Special
rules apply if an optionee surrenders shares of Common Stock in payment of the
exercise price of a Non-Qualified Option.
Limitation on Company's Deductions. As a result of Section 162(m) of the
Code, the Company's deduction for certain awards under the Plan may be limited
to the extent that the Chief Executive Officer or other named executive officer
whose compensation is required to be reported in the Summary Compensation Table
receives compensation (other than performance-based compensation) in excess of
$1 million a year.
NEW PLAN BENEFITS
As of the Record Date, approximately 35 persons were eligible to
participate in the 1996 Plan. The number of options to be granted under the 1996
Plan is undeterminable at this time as grants of stock options under the 1996
Plan are subject to the discretion of the Compensation Committee. The table
below shows the aggregate number of options that were granted under the 1996
Plan in Fiscal 1996.
THE COMPDENT CORPORATION 1996 STOCK OPTION PLAN
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME OF GROUP DOLLAR VALUE ($)* UNDERLYING STOCK OPTIONS
- ------------- ----------------- ------------------------
<S> <C> <C>
David R. Klock(1).............................. 660,000 120,000
Phyllis A. Klock(2)............................ 275,000 50,000
Sharon S. Graham(2)............................ 275,000 50,000
Bruce A. Mitchell(2)........................... 275,000 50,000
Philip Hertik(3)............................... 525,000 100,000
Executive Group(4)............................. 2,010,000 370,000
</TABLE>
- ---------------
* Based on the last reported sale price on the Nasdaq National Market on
December 31, 1996 of $35.25 less the option exercise price.
(1) On October 29, 1996, Dr. Klock was granted an option, which expires ten
years from the date of grant, to purchase 120,000 shares of Common Stock
under the 1996 Plan at an exercise price of $29.75 per share, of which
40,000 shares vested immediately upon grant and 80,000 shares vest annually
in equal installments over a four-year period.
(2) On October 29, 1996, Ms. Klock, Dr. Graham and Mr. Mitchell were each
granted an option, which expires ten years from the date of grant, to
purchase 50,000 shares of Common Stock under the 1996 Plan at an exercise
price of $29.75 per share, of which 20,000 shares vested immediately upon
grant and 30,000 shares vest annually in equal installments over a
four-year period.
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<PAGE> 17
(3) On December 16, 1996, Mr. Hertik was granted an option, which expires ten
years from the date of grant, to purchase 100,000 shares of Common Stock
under the 1996 Plan at an exercise price of $30.00 per share, of which
50,000 shares vested immediately upon grant and 50,000 shares vest annually
in equal installments over a four-year period.
(4) Represents options granted to Dr. Klock, Ms. Klock, Dr. Graham, Mr. Mitchell
and Mr. Hertik.
THE BOARD RECOMMENDS A VOTE FOR THE APPROVAL OF THE 1996 PLAN.
PRINCIPAL AND MANAGEMENT STOCKHOLDERS
The following table sets forth, to the best knowledge and belief of the
Company, certain information regarding the beneficial ownership of the Company's
Common Stock as of the date indicated by (i) each person known by the Company to
be the beneficial owner of more than 5% of the outstanding Common Stock as of
December 31, 1996, (ii) each of the Company's Directors as of the Record Date,
(iii) each of the named executive officers in the Summary Compensation Table as
of the Record Date and (iv) all of the Company's executive officers and
Directors as a group as of the Record Date.
<TABLE>
<CAPTION>
NAME OF BENEFICIAL OWNER(1) BENEFICIAL OWNERSHIP(2)
--------------------------- ----------------------------
SHARES PERCENT
--------- -------
<S> <C> <C>
AIM Management Group Inc.(3)................................ 1,027,100 10.20%
Pilgrim Baxter & Associates, Ltd.(4)........................ 1,011,700 10.05%
Putnam Investments, Inc.(5)................................. 1,005,385 9.99%
Janus Capital Corporation(6)................................ 961,750 9.56%
Massachusetts Financial Services Company.................... 649,395 6.45%
David R. Klock(7)........................................... 281,639 2.78%
Phyllis A. Klock(8)......................................... 221,825 2.19%
Sharon S. Graham(9)......................................... 67,149 *
Bruce A. Mitchell(10)....................................... 55,470 *
Philip Hertik(11)........................................... 59,000 *
Joseph A. Ciffolillo(12).................................... 5,000 *
David F. Scott, Jr.(13)..................................... 5,000 *
Joseph E. Stephenson(14).................................... 10,000 *
All executive officers and Directors as a group
(8 persons)(15)........................................... 705,083 6.82%
</TABLE>
- ---------------
* Represents less than 1% of the outstanding shares.
(1) The address of AIM Management Group Inc. and its affiliates ("AIM") is 11
Greenway Plaza, Suite 1919, Houston, TX 77046. The address of Pilgrim
Baxter & Associates, Ltd. and its affiliates ("Pilgrim") is 11255 Drummers
Lane, Suite 300, Wayne, PA 19087. The address of Putnam Investments, Inc.
and its affiliates ("Putnam") is One Post Office Square, Boston, MA 02109.
The address of Janus Capital Corporation and its affiliates ("Janus") is
100 Fillmore Street, Denver, CO 80206-4923. The address of Massachusetts
Financial Services Company is 500 Boylston Street, Boston, MA 02116.
Information with respect to the beneficial owners of more than 5% of the
outstanding Common Stock is based solely on information provided to the
Commission and the Company.
(2) All percentages have been determined as of the Record Date in accordance
with Rule 13d-3 under the Exchange Act. As of the Record Date, a total of
approximately 10,064,393 shares of Common Stock were issued and outstanding
and options to acquire a total of 270,999 shares of Common Stock were
exercisable within 60 days.
(3) As reported on the Schedule 13G filed with the Commission by AIM, such
figure includes shares of Common Stock held by AIM Advisors, Inc. and AIM
Capital Management, Inc., each of which is a wholly owned subsidiary of AIM
Management Group Inc.
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<PAGE> 18
(4) As reported on the Schedule 13G filed with the Commission by Pilgrim, such
figure includes shares of Common Stock with respect to which Harold J.
Baxter, Gary L. Pilgrim and PBHG Growth Fund may be deemed to have shared
voting and/or dispositive powers.
(5) As reported on the Schedule 13G filed with the Commission by Putnam, such
figure includes 825,050 and 180,335 shares of Common Stock held
respectively by Putnam Investment Management, Inc. and The Putnam Advisory
Company, Inc., each of which is a wholly owned subsidiary of Putnam
Investments, Inc.
(6) As reported on the Schedule 13G filed with the Commission by Janus, Thomas
H. Bailey owns approximately 12.2% of Janus Capital Corporation and serves
as its President and Chairman of the Board. Such Schedule 13G indicates
that while Mr. Bailey does not own of record any shares of Common Stock,
Mr. Bailey may be deemed to have the power to exercise or to direct the
exercise of voting and/or dispositive powers with respect to shares of
Common Stock held of record by Janus Capital Corporation. In such Schedule
13G, Mr. Bailey disclaims beneficial ownership of such shares.
(7) Includes 82,500 shares which Dr. Klock may acquire upon the exercise of
stock options within 60 days after the Record Date. Does not include
221,825 shares held by Dr. Klock's wife, Phyllis A. Klock, President of the
Company, with respect to which Dr. Klock disclaims beneficial ownership.
The Company has the right to repurchase 4,000 shares held by Dr. Klock at a
price of $2.96 per share pursuant to a Stock Redemption Agreement upon
exercise by Sharon S. Graham of certain options to purchase shares of
Common Stock granted to Dr. Graham by the Company pursuant to an Incentive
Stock Option Agreement dated as of July 29, 1994.
(8) Includes 55,000 shares which Ms. Klock may acquire upon the exercise of
stock options within 60 days after the Record Date. Does not include
281,639 shares held by Ms. Klock's husband, David R. Klock, Chairman and
Chief Executive Officer of the Company, with respect to which Ms. Klock
disclaims beneficial ownership.
(9) Includes 59,499 shares which Dr. Graham may acquire upon the exercise of
stock options within 60 days after the Record Date.
(10) Includes 55,000 shares which Mr. Mitchell may acquire upon the exercise of
stock options within 60 days after the Record Date.
(11) Represents 59,000 shares which Mr. Hertik may acquire upon the exercise of
stock options within 60 days after the Record Date.
(12) Represents 5,000 shares which Mr. Ciffolillo may acquire upon the exercise
of stock options within 60 days after the Record Date.
(13) Represents 5,000 shares which Dr. Scott may acquire upon the exercise of
stock options within 60 days after the Record Date.
(14) Includes 9,000 shares which Mr. Stephenson may acquire upon the exercise of
stock options within 60 days after the Record Date.
(15) Includes 270,999 shares which may be acquired upon the exercise of stock
options within 60 days after the Record Date.
MARKET VALUE
On December 31, 1996, the closing price of a share of the Company's Common
Stock on Nasdaq was $35.25.
EXPENSES OF SOLICITATION
The Company will pay the entire expense of soliciting proxies for the
Annual Meeting. In addition to solicitations by mail, certain Directors,
officers and regular employees of the Company (who will receive no compensation
for their services other than their regular compensation) may solicit proxies by
telephone, telegram or personal interview. Banks, brokerage houses, custodians,
nominees and other fiduciaries have been
15
<PAGE> 19
requested to forward proxy materials to the beneficial owners of shares held of
record by them and such custodians will be reimbursed for their expenses.
SUBMISSION OF STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Stockholder proposals intended to be presented at the Company's 1998 annual
meeting of stockholders must be received by the Company on or before November
18, 1997 in order to be considered for inclusion in the Company's proxy
statement and form of proxy for that meeting. The Company's By-laws provide that
any stockholder of record wishing to have a stockholder proposal considered at
an annual meeting must provide written notice of such proposal and appropriate
supporting documentation, as set forth in the By-laws, to the Company at its
principal executive office not less than 75 days or more than 120 days prior to
the first anniversary of the date of the preceding year's annual meeting. In the
event, however, that the annual meeting is scheduled to be held more than 30
days before such anniversary date or more than 60 days after such anniversary
date, notice must be so delivered not later than (i) the 15th day after the date
of public disclosure of the date of such meeting or (ii) the 75th day prior to
the scheduled date of such meeting. Any such proposal should be mailed to:
Secretary, CompDent Corporation, 100 Mansell Court East, Suite 400, Roswell,
Georgia 30076.
INDEPENDENT ACCOUNTANTS
The Company has selected Coopers & Lybrand L.L.P. as the independent public
accountants for the Company for the fiscal year ending December 31, 1997. The
firm of Coopers & Lybrand L.L.P. has served as the Company's independent public
accountants since January 1, 1994. A representative of Coopers & Lybrand L.L.P.
will be present at the Annual Meeting and will be given the opportunity to make
a statement if he or she so desires. The representative will be available to
respond to appropriate questions.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's officers and
Directors, and persons who own more than 10% of the Company's outstanding shares
of Common Stock (collectively, "Section 16 Persons"), to file initial reports of
ownership and reports of changes in ownership with the Commission and Nasdaq.
Section 16 Persons are required by the Commission to furnish the Company with
copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain Section 16 Persons that no Section 16(a)
reports were required for such persons, the Company believes that during Fiscal
1996, the Section 16 Persons complied with all Section 16(a) filing requirements
applicable to them, with the exception of Joseph B. Stephenson, a Director of
the Company, who did not timely file a Form 4 with respect to a an option
exercise and subsequent sale of shares of Common Stock. Mr. Stephenson
subsequently filed a Form 4.
OTHER MATTERS
The Board does not know of any matters other than those described in this
Proxy Statement which will be presented for action at the Annual Meeting. If
other matters are duly presented, proxies will be voted in accordance with the
best judgment of the proxy holders.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, YOU ARE
REQUESTED TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE
ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
16
<PAGE> 20
APPENDIX A
COMPDENT CORPORATION
1996 STOCK OPTION PLAN
SECTION 1. GENERAL PURPOSE OF THE PLAN; DEFINITIONS
The name of the plan is the CompDent Corporation 1996 Stock Option Plan
(the "Plan"). The purpose of the Plan is to encourage and enable the officers,
employees, directors, consultants, advisors and other key persons of CompDent
Corporation (the "Company") and its Subsidiaries (as defined below) upon whose
judgment, initiative and efforts the Company largely depends for the successful
conduct of its business to acquire a proprietary interest in the Company. It is
anticipated that providing such persons with a direct stake in the Company's
welfare will assure a closer identification of their interests with those of the
Company, thereby stimulating their efforts on the Company's behalf and
strengthening their desire to remain with the Company.
The following terms shall be defined as set forth below:
"Act" means the Securities Exchange Act of 1934, as amended.
"Award" or "Awards," except where referring to a particular category
of grant under the Plan, shall include Incentive Stock Options and
Non-Qualified Stock Options.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor Code, and related rules, regulations and interpretations.
"Committee" has the meanings specified in Section 2.
"Fair Market Value" of the Stock on any given date means (i) if the
Stock is admitted to quotation on the National Association of Securities
Dealers Automated Quotation System ("NASDAQ"), the Fair Market Value on any
given date shall not be less than the average of the highest bid and lowest
asked prices of the Stock reported for such date or, if no bid and asked
prices were reported for such date, for the last day preceding such date
for which such prices were reported; or (ii) if the Stock is admitted to
trading on a national securities exchange or the NASDAQ National Market
System, the Fair Market Value on any date shall not be less than the
closing price reported for the Stock on such exchange or system for such
date or, if no sales were reported for such date, for the last date
preceding such date for which a sale was reported; or (iii) if the Stock is
not publicly traded on a securities exchange or traded in the
over-the-counter market or, if traded or quoted, there are no transactions
or quotations within the last ten trading days or trading has been halted
for extraordinary reasons, the Fair Market Value on any given date shall be
determined in good faith by the Committee with reference to the rules and
principles of valuation set forth in Section 20.2031-2 of the Treasury
Regulations.
"Incentive Stock Option" means any Stock Option designated and
qualified as an "incentive stock option" as defined in Section 422 of the
Code.
"Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
"Option" or "Stock Option" means any option to purchase shares of
Stock granted pursuant to Section 5.
"Stock" means the Common Stock, par value $.01 per share, of the
Company, subject to adjustments pursuant to Section 3.
"Subsidiary" means any corporation or other entity (other than the
Company) in any unbroken chain of corporations or other entities, beginning
with the Company, if each of the corporations or entities (other than the
last corporation or entity in the unbroken chain) owns stock or other
interests possessing
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50% or more of the economic interest or the total combined voting power of
all classes of stock or other interests in one of the other corporations or
entities in the chain.
SECTION 2. ADMINISTRATION OF PLAN; COMMITTEE AUTHORITY TO SELECT PARTICIPANTS
AND DETERMINE AWARDS
(a) Committee. The Plan shall be administered by the Board of Directors of
the Company, or at the discretion of the Board by a committee of the Board of
not less than two "Non-Employee Directors" within the meaning of Rule
16b-3(b)(3)(i) under the Act. On and after the date the Plan becomes subject to
Section 162(m) of the Code, each member of the Committee shall be an "Outside
Director" within the meaning of Section 162(m) of the Code and the regulations
promulgated thereunder. All references herein to the Committee shall be deemed
to refer to the entity then responsible for administration of this Plan at the
relevant time (i.e., either the Board of Directors or a committee of the Board,
as applicable).
(b) Powers of Committee. The Committee shall have the power and authority
to grant Awards consistent with the terms of the Plan, including the power and
authority:
(i) to select the officers, employees, directors, consultants,
advisors and key persons of the Company and its Subsidiaries to whom Awards
may from time to time be granted;
(ii) to determine the time or times of grant, and the extent, if any,
of Incentive Stock Options and Non-Qualified Stock Options, or any
combination of the foregoing, granted to any one or more participants;
(iii) to determine the number of shares of Stock to be covered by any
Award;
(iv) to determine and modify from time to time the terms and
conditions, including restrictions, not inconsistent with the terms of the
Plan, of any Award, which terms and conditions may differ among individual
Awards and participants, and to approve the form of written instruments
evidencing the Awards;
(v) to accelerate at any time the exercisability or vesting of all or
any portion of any Award and/or to include provisions in Awards providing
for such acceleration;
(vi) to impose any limitations on Awards granted under the Plan,
including limitations on transfers, repurchase provisions and the like and
to exercise repurchase rights or obligations;
(vii) subject to the provisions of Section 5(a)(ii), to extend at any
time the period in which Stock Options may be exercised;
(viii) to determine at any time whether, to what extent, and under
what circumstances Stock and other amounts payable with respect to an Award
shall be deferred either automatically or at the election of the
participant and whether and to what extent the Company shall pay or credit
amounts constituting interest (at rates determined by the Committee) or
dividends or deemed dividends on such deferrals; and
(ix) at any time to adopt, alter and repeal such rules, guidelines and
practices for administration of the Plan and for its own acts and
proceedings as it shall deem advisable; to interpret the terms and
provisions of the Plan and any Award (including related written
instruments); to make all determinations it deems advisable for the
administration of the Plan; to decide all disputes arising in connection
with the Plan; and to otherwise supervise the administration of the Plan.
All decisions and interpretations of the Committee shall be binding on all
persons, including the Company and Plan participants.
(c) Delegation of Authority to Grant Awards. The Committee, in its
discretion, may delegate to the Chief Executive Officer of the Company all or
part of the Committee's authority and duties with respect to Awards, including
the granting thereof, to individuals who are not subject to the reporting and
other provisions of Section 16 of the Act or "covered employees" within the
meaning of Section 162(m) of the Code. The
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Committee may revoke or amend the terms of a delegation at any time but such
action shall not invalidate any prior actions of the Committee's delegate or
delegates that were consistent with the terms of the Plan.
SECTION 3. STOCK ISSUABLE UNDER THE PLAN; MERGERS; SUBSTITUTION
(a) Stock Issuable. The maximum number of shares of Stock reserved and
available for issuance under the Plan shall be 900,000 shares of Stock. For
purposes of the foregoing limitation, the shares of Stock underlying any Awards
which are forfeited, canceled, reacquired by the Company, satisfied without the
issuance of Stock or otherwise terminated (other than by exercise) shall be
added back to the shares of Stock available for issuance under the Plan. Subject
to such overall limitation, shares of Stock may be issued up to such maximum
number pursuant to any type or types of Award; provided, however, that on and
after the date the Plan is subject to Section 162(m) of the Code, Stock Options
with respect to no more than 250,000 shares of Stock may be granted to any one
individual participant during any one calendar year period. The shares available
for issuance under the Plan may be authorized but unissued shares of Stock or
shares of Stock reacquired by the Company.
(b) Recapitalizations. Subject to Section 3(c), if, through or as a result
of any merger, consolidation, sale of all or substantially all of the assets of
the Company, reorganization, recapitalization, reclassification, stock dividend,
stock split, reverse stock split or other similar transaction, the outstanding
shares of Stock are increased or decreased or are exchanged for a different
number or kind of shares or other securities of the Company or any successor
company, or additional shares or new or different shares or other securities of
the Company or any successor Company or other non-cash assets are distributed
with respect to such shares of Stock or other securities, the Committee shall
make an appropriate or proportionate adjustment in (i) the maximum number of
shares reserved for issuance under the Plan, (ii) the number of Stock Options
that can be granted to any one individual participant, (iii) the number and kind
of shares or other securities subject to any then outstanding Awards under the
Plan, and (iv) the price for each share subject to any then outstanding Stock
Options under the Plan, without changing the aggregate exercise price (i.e., the
exercise price multiplied by the number of shares) as to which such Stock
Options remain exercisable. The adjustment by the Committee shall be final,
binding and conclusive. No fractional shares of Stock shall be issued under the
Plan resulting from any such adjustment, but the Committee in its discretion may
make a cash payment in lieu of fractional shares.
(c) Mergers and Other Transactions. In the case of (i) the dissolution or
liquidation of the Company, (ii) a merger, reorganization or consolidation in
which a majority of the outstanding voting power of the Company is acquired by
another person or entity (other than a holding company formed by the Company),
(iii) the sale of all or substantially all of the assets of the Company to an
unrelated person or entity, or (iv) the sale of all of the Stock of the Company
to an unrelated person or entity (in each case, a "Transaction"), all
outstanding Options held by participants, to the extent not fully vested and
exercisable, shall not become fully vested and exercisable except as the
Committee may otherwise determine either in connection with the granting of an
Award as reflected in the terms of the relevant Award or in its discretion
thereafter. Upon the effectiveness of the Transaction, the Plan and all Awards
granted hereunder shall terminate, unless provision is made in connection with
the Transaction for the assumption of Awards heretofore granted, or the
substitution of such Awards of new Awards of the successor entity or parent
thereof, with appropriate adjustment as to the number and kind of shares and, if
appropriate, the per share exercise prices, as provided in Section 3(b) above.
In the event of such termination, each optionee shall be permitted to exercise
for a period of at least 15 days prior to the date of such termination all
outstanding Options held by such optionee which are then exercisable.
(d) Substitute Awards. The Committee may grant Awards under the Plan in
substitution for stock and stock based awards held by employees of another
corporation who become employees of the Company or a Subsidiary as the result of
a merger or consolidation of the employing corporation with the Company or a
Subsidiary or the acquisition by the Company or a Subsidiary of property or
stock of the employing corporation. The Committee may direct that the substitute
awards be granted on such terms and conditions as the Committee considers
appropriate in the circumstances.
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SECTION 4. ELIGIBILITY
Participants in the Plan will be such officers and other employees,
directors, consultants, advisors and other key persons of the Company and its
Subsidiaries who are responsible for or contribute to the management, growth or
profitability of the Company and its Subsidiaries as are selected from time to
time by the Committee, in its sole discretion.
SECTION 5. STOCK OPTIONS
Any Stock Option granted under the Plan shall be pursuant to a stock option
agreement which shall be in such form as the Committee may from time to time
approve. Option agreements need not be identical.
Stock Options granted under the Plan may be either Incentive Stock Options
or Non-Qualified Stock Options. Incentive Stock Options may be granted only to
employees of the Company or any Subsidiary that is a "subsidiary corporation"
within the meaning of Section 424(f) of the Code. Non-Qualified Stock Options
may be granted to officers, employees, directors, consultants, advisors and
other key persons of the Company and its Subsidiaries. To the extent that any
Option does not qualify as an Incentive Stock Option, it shall be deemed a
Non-Qualified Stock Option.
No Incentive Stock Option shall be granted under the Plan after December
18, 2006.
(a) Terms of Stock Options. Stock Options granted under the Plan shall be
subject to the following terms and conditions and shall contain such additional
terms and conditions, not inconsistent with the terms of the Plan, as the
Committee shall deem desirable:
(i) Exercise Price. The exercise price per share for the Stock
covered by a Stock Option shall be determined by the Committee at the time
of grant but shall not be less than 100% of the Fair Market Value on the
date of grant. If an employee owns or is deemed to own (by reason of the
attribution rules applicable under Section 424(d) of the Code) more than
10% of the combined voting power of all classes of stock of the Company or
any parent or subsidiary corporation and an Incentive Stock Option is
granted to such employee, the option price of such Incentive Stock Option
shall be not less than 110% of the Fair Market Value on the grant date.
(ii) Option Term. The term of each Stock Option shall be fixed by the
Committee, but no Incentive Stock Option shall be exercisable more than ten
years after the date the option is granted. If an employee owns or is
deemed to own (by reason of the attribution rules of Section 424(d) of the
Code) more than 10% of the combined voting power of all classes of stock of
the Company or any parent or subsidiary corporation and an Incentive Stock
Option is granted to such employee, the term of such option shall be no
more than five years from the date of grant.
(iii) Exercisability; Rights of a Stockholder. Stock Options shall
become vested and exercisable at such time or times, whether or not in
installments, as shall be determined by the Committee at or after the grant
date; provided, however, that Stock Options granted in lieu of cash
compensation shall be exercisable in full as of the grant date. The
Committee may at any time accelerate the exercisability of all or any
portion of any Stock Option. An optionee shall have the rights of a
stockholder only as to shares acquired upon the exercise of a Stock Option
and not as to unexercised Stock Options.
(iv) Method of Exercise. Stock Options may be exercised in whole or
in part, by giving written notice of exercise to the Company, specifying
the number of shares to be purchased. Payment of the purchase price may be
made by one or more of the following methods:
(A) In cash, by certified or bank check or other instrument
acceptable to the Committee;
(B) In the form of shares of Stock that are not then subject to
restrictions under any Company plan and that have been held by the
optionee free of such restrictions for at least six months, if permitted
by the Committee in its discretion. Such surrendered shares shall be
valued at Fair Market Value on the exercise date;
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(C) By the optionee delivering to the Company a properly executed
exercise notice together with irrevocable instructions to a broker to
promptly deliver to the Company cash or a check payable and acceptable
to the Company to pay the purchase price; provided that in the event the
optionee chooses to pay the purchase price as so provided, the optionee
and the broker shall comply with such procedures and enter into such
agreements of indemnity and other agreements as the Committee shall
prescribe as a condition of such payment procedure; or
(D) By the optionee delivering to the Company a promissory note if
the Board has authorized the loan of funds to the optionee for the
purpose of enabling or assisting the optionee to effect the exercise of
his or her Stock Option; provided that at least so much of the exercise
price as represents the par value of the Stock shall be paid other than
with a promissory note.
Payment instruments will be received subject to collection. The delivery of
certificates representing the shares of Stock to be purchased pursuant to
the exercise of a Stock Option will be contingent upon receipt from the
optionee (or a purchaser acting in his or her stead in accordance with the
provisions of the Stock Option) by the Company of the full purchase price
for such shares and the fulfillment of any other requirements contained in
the Stock Option or applicable provisions of laws.
(v) Termination. Stock Options shall terminate at such times as are
specified in the relevant Award.
(vi) Annual Limit on Incentive Stock Options. To the extent required
for "incentive stock option" treatment under Section 422 of the Code, the
aggregate Fair Market Value (determined as of the time of grant) of the
shares of Stock with respect to which Incentive Stock Options granted under
this Plan and any other plan of the Company or its parent and subsidiary
corporations become exercisable for the first time by an optionee during
any calendar year shall not exceed $100,000. To the extent that any Stock
Option exceeds this limit, it shall constitute a Non-Qualified Stock
Option.
(b) Reload Options. At the discretion of the Committee, Options granted
under the Plan may include a "reload" feature pursuant to which an optionee
exercising an option by the delivery of a number of shares of Stock in
accordance with Section 5(a)(iv)(B) hereof would automatically be granted an
additional Option (with an exercise price equal to the Fair Market Value of the
Stock on the date the additional Option is granted and with the same expiration
date as the original Option being exercised, and with such other terms as the
Committee may provide) to purchase that number of shares of Stock equal to the
number delivered to exercise the original Option.
(c) Non-transferability of Options. No Stock Option shall be transferable
by the optionee otherwise than by will or by the laws of descent and
distribution and all Stock Options shall be exercisable, during the optionee's
lifetime, only by the optionee. Notwithstanding the foregoing, the Committee may
provide in an option agreement that the optionee may transfer, without
consideration for the transfer, his or her Non-Qualified Stock Options to
members of his or her immediate family, to trusts for the benefit of such family
members, to partnerships in which such family members are the only partners; or
to charitable organizations; provided, however, that the transferee agrees in
writing to be bound by the terms and conditions of this Plan and the applicable
Option Agreement.
SECTION 6. TAX WITHHOLDING
(a) Payment by Participant. Each participant shall, no later than the date
as of which the value of an Award or of any Stock or other amounts received
thereunder first becomes includable in the gross income of the participant for
Federal income tax purposes, pay to the Company, or make arrangements
satisfactory to the Committee regarding payment of, any federal, state, or local
taxes of any kind required by law to be withheld with respect to such income.
The Company and its Subsidiaries shall, to the extent permitted by law, have the
right to deduct any such taxes from any payment of any kind otherwise due to the
participant.
(b) Payment in Stock. Subject to approval by the Committee, a participant
may elect to have such tax withholding obligation satisfied, in whole or in
part, by (i) authorizing the Company to withhold from shares of Stock to be
issued pursuant to any Award a number of shares with an aggregate Fair Market
Value (as of
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the date the withholding is effected) that would satisfy the withholding amount
due, or (ii) transferring to the Company shares of Stock owned by the
participant with an aggregate Fair Market Value (as of the date the withholding
is effected) that would satisfy the withholding amount due.
SECTION 7. TRANSFER, LEAVE OF ABSENCE, ETC.
For purposes of the Plan, the following events shall not be deemed a
termination of employment:
(a) a transfer to the employment of the Company from a Subsidiary or
from the Company to a Subsidiary, or from one Subsidiary to another; or
(b) an approved leave of absence for military service or sickness, or
for any other purpose approved by the Company, if the employee's right to
re-employment is guaranteed either by a statute or by contract or under the
policy pursuant to which the leave of absence was granted or if the
Committee otherwise so provides in writing.
SECTION 8. AMENDMENTS AND TERMINATION
The Board may, at any time, amend or discontinue the Plan and the Committee
may, at any time, amend or cancel any outstanding Award (or provide substitute
Awards at the same or reduced exercise or purchase price or with no exercise or
purchase price in a manner not inconsistent with the terms of the Plan), but
such price, if any, must satisfy the requirements which would apply to the
substitute or amended Award if it were then initially granted under this Plan
for the purpose of satisfying changes in law or for any other lawful purpose,
but no such action shall adversely affect rights under any outstanding Award
without the holder's consent. If and to the extent determined by the Committee
to be required by the Act to ensure that Incentive Stock Options granted under
the Plan are qualified under Section 422 of the Code, Plan amendments shall be
subject to approval by the Company stockholders who are eligible to vote at a
meeting of stockholders.
SECTION 9. STATUS OF PLAN
With respect to the portion of any Award which has not been exercised and
any payments in cash, Stock or other consideration not received by a
participant, a participant shall have no rights greater than those of a general
creditor of the Company unless the Committee shall otherwise expressly determine
in connection with any Award or Awards. In its sole discretion, the Committee
may authorize the creation of trusts or other arrangements to meet the Company's
obligations to deliver Stock or make payments with respect to Awards hereunder,
provided that the existence of such trusts or other arrangements is consistent
with the foregoing sentence.
SECTION 10. GENERAL PROVISIONS
(a) No Distribution; Compliance with Legal Requirements. The Committee may
require each person acquiring Stock pursuant to an Award to represent to and
agree with the Company in writing that such person is acquiring the shares
without a view to distribution thereof.
No shares of Stock shall be issued pursuant to an Award until all
applicable securities law and other legal and stock exchange or similar
requirements have been satisfied. The Committee may require the placing of such
stop-orders and restrictive legends on certificates for Stock and Awards as it
deems appropriate.
(b) Other Compensation Arrangements; No Employment Rights. Nothing
contained in this Plan shall prevent the Board from adopting other or additional
compensation arrangements, including trusts, and such arrangements may be either
generally applicable or applicable only in specific cases. The adoption of this
Plan and the grant of Awards do not confer upon any employee any right to
continued employment with the Company or any Subsidiary.
SECTION 11. GOVERNING LAW
This Plan shall be governed by Delaware law except to the extent such law
is preempted by federal law.
Adopted and Effective: December 18, 1996
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APPENDIX B
REVOCABLE PROXY/VOTING INSTRUCTION CARD
COMPDENT CORPORATION
100 MANSELL COURT EAST, SUITE 400, ROSWELL, GEORGIA 30076
PROXY FOR 1997 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON
WEDNESDAY, APRIL 30, 1997 AT 2:00 P.M.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Bruce A. Mitchell as proxy of
the undersigned (the "Proxy"), with full power to appoint his substitute, and
authorizes him to represent and to vote all shares of Common Stock of CompDent
Corporation (the "Corporation") held by the undersigned at the close of
business on March 14, 1997, at the Annual Meeting of Stockholders to be held at
the Atlanta Airport Hilton Hotel, Atlanta, Georgia, on Wednesday, April 30,
1997 at 2:00 p.m., local time, and at any adjournments or postponements
thereof.
When properly executed this proxy will be voted in the manner directed herein
by the undersigned stockholder(s). If no direction is given, this proxy will
be voted FOR the election of the nominees listed in Proposal 1 and FOR Proposal
2, set forth on the reverse side hereof, and in their discretion, the Proxy is
authorized to vote upon such other business as may properly come before the
meeting and any adjournments or postponements thereof. A stockholder wishing
to vote in accordance with the Board of Directors' recommendations need only
sign and date this proxy and return it in the postage-paid envelope provided.
PLEASE VOTE, DATE AND SIGN ON REVERSE AND
RETURN PROMPTLY IN THE ENCLOSED ENVELOPE
Please sign exactly as your name(s) appear(s) hereon. Where there is more than
one holder, each should sign. When assigning as attorney, administrator,
executor, guardian or trustee, please give your title as such. If executed by
a corporation, the proxy should be signed by a duly authorized person, stating
such person's title or authority. If a partnership, please sign in partnership
name by authorized person.
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
- ------------------------- ----------------------------
- ------------------------- ----------------------------
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<TABLE>
<S> <C> <C>
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
COMPDENT CORPORATION 1. Election of Class II Directors. With- For All
NOMINEES: For hold Except
PHILIP HERTIK [ ] [ ] [ ]
DAVID F. SCOTT
RECORD DATE SHARES: NOTE: If you do not wish your shares voted "For" a particular
nominee, mark the "For All Except" box and strike a line through
the nominee's name. Your shares will be voted for the remaining
nominee.
2. To approve the CompDent Corporation
1996 Stock Option Plan. For Against Abstain
[ ] [ ] [ ]
The undersigned hereby acknowledge(s) receipt of a copy of the
accompanying Notice of 1997 Annual Meeting of Stockholders, the
Proxy Statement with respect thereto and the Corporation's
Annual Report to Stockholders for fiscal year 1996, and hereby
revoke(s) any proxy or proxies heretofore given. This proxy
may be revoked at any time before it is exercised.
Please be sure to sign and date this Proxy. Date
--------------
Mark box at right if an address change or comment has been
noted on the reverse side of this card. [ ]
Stockholder sign here Co-owner sign here
DETACH CARD DETACH CARD
</TABLE>
COMPDENT CORPORATION
Dear Shareholder:
Please take note of the important information enclosed with this Proxy Ballot.
There are a number of issues related to the management and operation of your
Corporation that require your immediate attention and approval. These are
discussed in detail in the enclosed proxy materials.
YOUR VOTE COUNTS, AND YOU ARE STRONGLY ENCOURAGED TO EXERCISE YOUR RIGHT TO
VOTE YOUR SHARES.
Please mark the boxes on this proxy card to indicate how your shares will be
voted. Then sign the card, detach it and return your proxy vote in the
enclosed postage-paid envelope.
Your vote must be received prior to the Annual Meeting of Stockholders, April
30, 1997.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
CompDent Corporation
